As we previously reported, FINRA is making changes to Rule 2111, the suitability rule, in order to conform the quantitative suitability prong to the formulation that is used in Reg BI, as well as to make clear the instances in which the FINRA suitability rule remains applicable. In addition, FINRA is amending its rules (Rule 2310, Rule 2320, Rule 2341, and Rule 5110) relating to non-cash compensation in order to conform these rules in light of the prohibition in Reg BI against sales contests, sales quotas, bonuses, and non-cash compensation. The amended FINRA rules will specify that any non-cash compensation arrangement permitted by the rules must be consistent with the requirements of Reg BI.

The amended rules are expected to become effective on Tuesday, June 30, 2020, the Reg BI effective date.3

Footnotes

3 FINRA Regulatory Notice 20-18 is available at: https://www.finra.org/sites/default/files/2020-06/Regulatory-Notice-20-18.pdf

Originally published 27 June, 2020

Originally published in REVERSEinquiries: Volume 3, Issue 6.
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